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Wage Dispersion and Inter-Firm Bargaining in a Search and Matching Model

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  • Dale T. Mortensen

    (Northwestern and Aarhus Universities)

Abstract

In the context of the canonical search and matching model with many worker firms, it is known that a unique single wage steady state equilibrium exists even when employer factor productivity differs. Contrary to this result, matched employer-employee data suggest both wage and productivity dispersion and a positive cross-firm correlation between the two. In this paper, the existence of a continuum of steady state equilibrium each characterized by a non-degenerate distribution of wages with the property that more productive firm pay more is established if employed worker can search on-the-job. Furthermore, the unemployment rate in any of the disperse wage equilibria is lower than in the single wage equilibrium.

Suggested Citation

  • Dale T. Mortensen, 2009. "Wage Dispersion and Inter-Firm Bargaining in a Search and Matching Model," 2009 Meeting Papers 791, Society for Economic Dynamics.
    • Handle: RePEc:red:sed009:791
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    Cited by:

    1. Dossche, Maarten & Lewis, Vivien & Poilly, Céline, 2014. "Employment, hours and optimal monetary policy," Working Paper Series 1713, European Central Bank.
    2. Dale T. Mortensen & Bent Jesper Christensen & Jesper Bagger, 2010. "Wage and Productivity Dispersion: Labor Quality or Rent Sharing?," 2010 Meeting Papers 758, Society for Economic Dynamics.
    3. Christian Holzner & Mario Larch, 2022. "Convex vacancy creation costs and on‐the‐job search in a global economy," The World Economy, Wiley Blackwell, vol. 45(1), pages 136-175, January.

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